NGNM: Q3 Update
Neogenomics Partners with Response Genetics
Posts 62% year-over-year growth in Q3
2008
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NeoGenomics reported a net loss for the third quarter of 2008 of $195,125, and diluted EPS of ($0.01) but the company was cash flow positive. Revenue was up 62% year-over-year and 4% on a sequential basis to $5.05 million. The slow sequential growth is attributable to seasonality offset by a better customer mix of high margin cytometry tests. Management has guided towards sequential revenue growth of 15-20% in the next quarters and has said October was a record revenue month.
We believe results may trend towards the high end of this range as testing volume and scale continually increase due to marketing new products, a new revenue stream from the Contract Research Organization (CRO) and continued rollout of the new GPS products. Its recent partnership with Response Genetics will add to the customer base and further highlight NeoGenomics’ ability to partner for high-end tests. The management remains focused and highly disciplined in its approach to expand its infrastructure and personnel to support its rapid growth and resisting the temptation of net margin expansion. The company expects to continue recruiting and increasing its sales force to bring awareness and educate its customer base of its existing and new products. Management has also hinted at a fourth lab in the northwest, if the same is required. We believe this steady approach speaks volumes about their ability to take the company forward. We maintain our strong buy rating and hold our target price at $2.20 by the end of 2009.
Key Points
Requisitions increased 38.0%
Free cash flow positive in Q3 ‘08
Expects 30-32 sales representatives by 2009
Agreement for KRAS panel testing with Response Genetics
Year-over-year increase of 61.7% in revenue vs. Q3 ‘07
SG&A margin fell to 52.2% in Q3 ‘08 from 69.8% in Q3 ‘07
Continued focus on hematology/oncology as core products
Expects to expand infrastructure to sustain future growth
Days Sales Outstanding (DSO) reduced to 61 days from 68 days
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